China is a big player these days in many global issues, but in this new Iran war it is to a large extent a bystander, feeling the effects and trying to work out how this is going to play out. The initial consequences are a sharp cut in seaborne oil supplies from the Gulf, a gathering global logistics nightmare, many cancelled Chinese flights and stranded people, and Chinese companies that are struggling to rearrange their businesses to meet this new situation. The markets in Hong Kong and Shanghai are in rollercoaster mode, as are markets around the world, and gold is a buy. It could be that in the longer term the US and Israeli attacks on Iran will be to the geopolitical advantage of Beijing, but it is also possible that the opposite turns out to be the case. It’s a weird war, and the Trumpists have had great difficulty explaining the attack, which started by taking out the supreme leader. Chinese people traditionally respect a show of force, but only when it is effective, and that relates to clear goals being met. The world is waiting.
All this will for sure have a significant impact on China’s economy, but the GDP growth target for this was ratified on Thursday by the NPC at 4.5 to 5%, a new low target range set by the party last October, long before a lot of other things happened.
It was noted that there have been not PLA planes flying around Taiwan over the past six days. It could be an olive branch, but probably more likely to conserve aviation fuel in light of tight supplies. You cannot run a military operation on solar power and a significant portion of China’s oil imports come via the Strait of Hormuz, currently basically shut down. There has been speculation that all these actions, including Venezuela, are ultimately aimed, indirectly, at China, but that seems to be an overly conspiratorial guess. Is the goal simply to make Iran chaotic in the same way the Syria and Iraq are relatively failed states? But if that is the case, how would it make the world safer for Israeli and US billionaires? It’s all very puzzling. Fortune tellers who predicted a rough ride for the year of the horse can feel smug right out of the gate.
Have a great weekend regardless.